We think everyone will agree with us when we say that 2020 was one of the worst years we’ve ever had in recent history. The pandemic didn’t just make us fearful for our health and safety but it also brought about economic instability.
Businesses and corporations were forced to shut down. Factories and assembly lines came to a grinding halt. Workers were sent home with no job security with a lot of them laid off and furloughed. The stock market was turned upside down. To say that it caused a pandemonium would still not fully give justice to what we experienced in 2020.
But somehow we found ways to survive. Most people became enterprising and started home-based businesses just to get by. Others were fortunate enough to be given the privilege of working from home. Given all the effort everyone exerted to survive 2020, most folks are now wondering how the pandemic has affected their credit scores and how can they significantly improve them this year.
Here are some of the ways that you can bring up your credit score in 2021.
10 Things You Can Do to Improve Your Credit Score in 2021
- Automate your bills payments
One of the things that can impact your credit score is your payment history. Avoid the adverse effect of missed and late payments by automating your bill payment. Just make sure you have enough money in your account to cover your bills monthly.
- Prioritize paying off your debts
Next to your payment history, the amount of your revolving debt versus your credit limit can greatly affect your credit score. If you have high-interest credit card debts, make sure to prioritize them first over your other loans. Your goal is to keep your credit utilization ratio below 30%.
- Consider a credit-builder loan
An easy way to build credit from scratch or after a really bad hit is to take up credit-builder loans from credit unions. You’ll commit to making regular fixed payments from 6 to 24 months and the lender will report your on-time payments that will help bring up your credit score.
- Keep a close eye on your credit report
Obviously, you will have a hard time improving your credit score if you don’t monitor it regularly. Be wary of errors on your report. As soon as you spot one, immediately file for a dispute and ask for a correction.
- Keep old credit card accounts open
If you have an old credit card you no longer use, we recommend not closing the account. The reason for this is that long-standing accounts and a high credit limit are good for your credit score.
- Limit your new credit applications
If you’re planning to apply for a new credit card, think it over really hard and only get the card that you need. Whenever you apply for a new card or loan, hard inquiries will reflect on your record which could make your score take a dip.
- Pay credit card balances on time every month
Build the habit of paying your credit card balances promptly every month. As much as you can, zero out your monthly statement to maintain a low credit utilization ratio.
- Seek out the assistance of nonprofit credit counselors
If you’re not really great at handling your finances and you have no idea how to create a budget or take on your debts, you can talk to a certified credit counselor to help get you on the right track. Usually, nonprofit credit counseling agencies offer free consultations. They can help pinpoint areas that you need to work on so that you can reach your financial goals and significantly bring your score up.
- Get back to paying off existing loans
If you benefited from the C.A.R.E.S. Act and took advantage of some relief measures, resuming your payment on your student loan, mortgage, and other loans can be a positive thing for your credit report. Talk to your lender and ask them about any adjustments to your repayment terms. Make sure you fully understand the changes so you know if you need to cut down on your spending or need to look for a side gig.
- Make a budget!
One of the easiest yet most practical ways that you can improve your credit score this year is to make a budget. Yes, a monthly budget that will help you keep track of all your cash flow. Seeing how your money moves monthly gives you a better idea of how to manage your finances.
We hope that you found all the information provided above useful as you work hard to raise your credit score this year. Here’s to your financial breakthrough!